Almost half of adult Americans in their 40s and 50s are part of the sandwich generation — meaning they have a parent age 65 or older and are either raising a child under 18 or financially supporting a grown child.
In addition to providing support to their children under 18, people in the sandwich generation can often be in the position of providing emotional and financial support to both their parents and their grown children, increasing their own stress level. For example:
- As of July 2020, 52 percent of 18- to 29-year-olds lived at home with their parents.
- 1 in 7 adults in their 40s and 50s are giving financial help to their parents and one or more children.
- 78 percent of family caregivers incur out-of-pocket expenses related to caregiving — mortgage or rent payments, medical costs and home modifications, for example — averaging $7,242 a year.
If you’re one of the millions of sandwich caregivers in the U.S., here are four tips to help you manage your finances and stress levels:
- Take care of your finances first.
Taking care of your own needs first is true when it comes to your finances. It may be tempting to pull back on retirement savings when you have immediate financial concerns for your parents or children. But an average 65-year-old American can expect to live to about age 83, and one member of a married couple may live longer. So it’s important to save enough to make sure you don’t outlive your money — potentially putting your kids on the hook to support you in the future.
At the very least, make sure you contribute enough to your 401(k) to earn your employer match. Once you’ve covered that first step, consider making an appointment with a financial professional to determine how to round out your retirement planning — whether that means additional 401(k) contributions, a traditional or Roth IRA, an annuity or a combination of those vehicles. - Work with your children on a financial plan.
No matter your kids’ ages, they can be a part of planning for their financial futures. If your child is under 18, talk to them about your household budget, perhaps have them pay a portion of their personal expenses such as their cell phone bill, and talk to them about their post-high school plans. In the United States, the average cost of college tuition plus additional expenses is $35,720 per student per year — a figure that has tripled in the last 20 years. So if college is going to be part of the equation, the sooner you start saving, the better. Consider working with a financial professional who specializes in college planning to help determine your best college-savings approach — as well as other steps you can take to minimize the cost of college.
If your adult child still needs financial assistance post-college, work with them on a budget and let them know how much you’re willing to contribute. Instead of paying down college loans or other debt for them, help them gain personal responsibility by offering to match any loan payments they make beyond the minimum payment, for instance. Help them find ways to reduce their expenses, such as moving back home for a year or two while they focus on paying off debt or building savings. - Help your parents plan.
Your parents should have a plan for important legal and financial matters like retirement spending, long-term care and estate planning — including key documents like wills, trusts, advanced health care directives, and medical and financial powers of attorney. If they already have a plan, take some time to have a conversation with them to help you understand your role. If they don’t have a plan, help them work with appropriate financial and legal professionals to get a plan in place. - Know your limits.
Maybe you’re willing to pay for your daughter’s cell phone bill or let her live with you for her first year or two after college but need her to become more independent after that. Maybe you’re okay with helping manage your parents’ financial and legal affairs, but don’t want to provide in-home personal care.
Whatever your limits — and these may evolve over time — make sure to keep communication lines open with both your parents and your children. If you are a physical caretaker, know your limits that way also. Take the time to take care of yourself emotionally and physically to help avoid caregiver burnout.
Life changes and your financial plan should change with your needs. Give us a call today, at (213) 765-0899 so that we may discuss how these life events may affect your financial goals and strategy.